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Financial Illiteracy

The Seattle Times started the New Year calling you a financial dunderhead. Maybe not you. Maybe a few people you know. “Financial illiteracy has cost the nation trillions of dollars in hard-earned savings, investment and mortgage payments,” they said in an editorial titled Nation of financial dunderheads needs formal instruction. Here’s where we come in since Your Money or Your Life could be characterized as a program for financial literacy. Playing with money is like playing with matches- both can burn you if you don’t know what you are doing. Where was it ever written that the “pursuit of happiness” meant uninformed access to dangerous weapons like credit cards and mortgages with no downpayment? There will be a rush to fiscal prudence. Mark my words! Those of you who followed the FI program in the past will find yourselves the life of the party rather than the party pooper in the corner. Resisting the temptation to say “I told you so” we’ll all suit up for a new task: being financial literacy educators.

If you’ve put the 9-step program in Your Money or Your Life into practice in your own life and want to teach it, a good place to start is on www.financialintegrity.org. There are teaching tools there and on-line support.

Part of the problem, of course, is that financial products have multiplied so quickly that any of us can be an overnight dunderhead. I have actually not kept up with all these exotic financial products and have fended off people with ‘sure things’. I would rather keep current with my values and deeper desires than with financial exotics. If you want peace of mind and time free from something other than minding your investments, then you can stay – like me – informed about only a few financial products with a tried and true track record. This is what Joe suggested: stick with what you can understand and what preserves your capital.

The Seattle Times concludes saying, “In the process of rebuilding what collapsed in 2008, none of us can afford the luxury of putting investments on automatic pilot. Being better consumers will be part of finding money to invest and save.” Mark Zaifman worked hard with us on the investing chapter (Chapter 9) to both empower readers to be financially literate about investments while doing what Joe said: pick something simple, with a track record, with a decent rate of return and more indicators of integrity than just that someone’s uncle harry said it was a sure thing.

There is such an opportunity right now to define the lessons we’re going to learn. Reactive lessons would be any that seek to hide your ignorance, blame someone else or cover your shame. Proactive lessons are those you learn having thought deeply and paid attention to reality. Which i think is what FIers do. Financial literacy begins, I think, with owning how illiterate we all are and choosing to become informed and make wise choices.